Gist of EPW February Week 3, 2019

The Economic and Political Weekly (EPW) is an important source of study material for IAS, especially for the current affairs segment. In this section, we give you the gist of the EPW magazine every week. The important topics covered in the weekly are analysed and explained in a simple language, all from a UPSC perspective.

Topic covered in this article are:
1. Can Social Media Be Democratised?
2. Taxation and the Rule of Law
3. All India Rural Financial Inclusion Survey

1. Can Social Media Be Democratised?

Context

A 31-member parliamentary panel headed by Anurag Thakur has summoned the chief executive officer (CEO) of Twitter, Jack Dorsey, to discuss regarding “safeguarding of citizens’ rights” on social media.

Analysis of the Issue

  • The current government appears to have taken a special interest in social media, as the 2019 elections are nearing.
  • The social media has altered the process of “news gathering” now there is a structural shift, as traditional media—that is, print and television—and new media are increasingly becoming inter­dependent.
  • Donald Trump’s election uncovered a few ways (campaign manipulation, filter bubbles, harassment, trolling, and fake trends) in which social media was used to influence the election.
  • Nowadays social media sites are used as a medium to propagate the political agenda, spread fake news and thereby influencing the Public Sentiment
  • Abraham Lincoln said: “Public sentiment is everything. With it, nothing can fail; against it, nothing can succeed. Whoever moulds public sentiment goes deeper than he who enacts statutes, or pronounces judicial decisions.” This is as true today as it was in Lincoln’s times.

Remedial measures

  • Facebook’s CEO, Mark Zuckerberg, was held accountable after Trump’s election and has since “pledged” to work towards making Facebook more transparent. Other platforms have followed suit.
  • Facebook recently announced changes to how advertisements relating to political parties would appear on users’ newsfeed.
  • Twitter is trying to monitor accounts and hate speech more closely.
  • The Election Commission of India has drawn up certain instructions in relation to the use of social media by political parties in the interest of transparency and creating a level playing field in the elections.
  • But, these measures are ad hoc responses that do not adequately address the magnitude of the problem.

Social Media and its challenges

  • Social media has put a huge question mark of privacy of people. E.g. Case of Facebook and Cambridge Analytica where personal information of users was being traded for monetary gains.
  • This media has also enabled radical and terrorist groups to promote radicalisation, recruit people and distribute their literature; Issue of Lone-wolf attacks who have been radicalised by these kinds of literature.
  • Critics argue that rather than uniting and informing, social media deepens social and political divisions and erodes trust in the democratic process. Constructed as a marketplace of views, social media tends to favour privilege and the privileged.

Is social media a levelling field?

  • We tend to presume that the internet is an inherently equalising space, but why do some voices get amplified, while others remain unheard?
  • When anonymous private entities with high capital can pay for more space for their opinions, they are effectively buying a louder voice. Not every voice on the internet commands the same kind of audience.
  • If political discourse in the digital sphere is a matter of out-shouting one’s opponent till an election is won, then the quality of politics suffers.
  • Voices from the grassroots do not have the volume to compete with the kind of resources that larger political parties can employ for mobilising the vote bank.

Why Social Media will remain non-democratic

  • Regarding the expenditure of political parties on social media we can keep a check, but can we scrutinise the money spent by individuals on behalf of political parties?

The anonymity that the internet lends was supposed to aid freedom of speech and, thereby, help democracy thrive.

  • But, political elites have managed to use the same tool of anonymity, capital, and technology to influence public opinion, promote political agendas, and disseminate fake and misleading news and information.
  • Correcting these problems will be self-defeating for both social media companies and political parties.
  • Masquerading as democratic, the operating principle of these platforms is not democratic, but commercial and is, in essence, what can be called a “marketplace of views.”

Conclusion

  • The focus of social media sites is restricted to the promotion of content that generates more user engagement, regardless of how inflammatory the content may be.
  • What we tend to forget is that social media is not an ideology or an ideal or a moral institution, but a product built by companies to make profits.
  • There is a need to understand how the internet is affecting our political lives so that we can:
  • Ensure formulation and enforcement of Strict Privacy Law and our right to speak freely.
  • Have a strict cybersecurity system and Law enforcement
  • Also, the companies and political parties should be held accountable

2. Taxation and the Rule of Law

The power to tax for the functioning of a government is as important as the rule of law that requires the power of government to levy and collect tax to be governed by law. Judiciary should ensure government follows the mandate of the law.

Context

The shortfall in the tax revenues from the budget estimates for 2018 – 19 has made the tax authorities to extract more tax using various measures.

“Tax terrorism” and other issues

  • Start-ups, which had been served notices on the so-called “angel tax,” found that their bank accounts had been emptied on the orders of the income tax department.
  • The Income Tax Refunds are alleged to have been delayed for previous years’ assessments in order to shore up tax collections
  • Those running businesses found themselves facing arrest and detention over disagreements with the tax authorities, even when there was no material to show that they were deliberately hiding tax revenue.
  • Further, the manner in which the goods and services tax has been rolled out has led to confusion among taxpayers and delay in refunds, which saw businesses shutting down due to lack of working capital.
  • “Tax terrorism” is not just a recent phenomenon it has been in currency for a while now.
  • There have been long-standing systemic problems with the working of the tax department:
  • Complaints of high-pitched demands that do not stand scrutiny in courts,
  • Appeals that are filed mindlessly, and
  • Notices that are issued with deadlines that are impossible to comply with.

Analysis of the issue

  • Courts have been holding the tax department accountable but they misinterpret the judgments of Mafatlal Industries Ltd v Union of India (1997), which justifies some of the questionable actions of the tax collector.
  • In the Mafatlal case, the Supreme Court held that refunds of tax paid under a law declared unconstitutional by the court could be claimed by an entity, provided it should show that it has not passed on the tax to the end user of the product or service.
  • Two Views in Mafatlal Judgement
    • Majority judgment in the case applied the interpretation of Article 265 of the Constitution: a “tax” that is levied and collected without the authority of a law is unconstitutional and, therefore, the person from whom such money is collected is entitled to a refund.
    • This is not acceptable to the majority since the indirect tax is paid by the consumer to an entity which in turn pays to the government, so in case of refund of such tax the entity will be benefitted.
  • To avoid this consequence, judgment comes to the conclusion that Article 39 clause (b) and (c) (use of resources for the common good and the prevention of concentration of wealth.) must be harmoniously interpreted with Article 265 to mean that an indirect tax collected without the authority of the law need not be returned to the payer because it might result in a “benefit” to the taxpayer. While Article 265 applies to both direct and indirect taxes, the majority judgement limits the application of Article 39 only to indirect taxes.

Conclusion

  • The Court has, in the past, held that, the directive principles of state policy cannot be used to override the rule of law and constitutionalism (Minerva Mills v Union of India 1980), but, without explicitly saying so, the consequence of the Mafatlal judgment is precisely this.
  • The doctrine of unjust enrichment might seem like an issue of indirect taxation, but it goes to the heart of what rule of law means in India.
  • Reading the Mafatlal judgment, one gets the sense that, when it comes to taxation, the Court seems to consider the rule of law as expendable.


3. All India Rural Financial Inclusion Survey

Context

  • The National Bank for Agriculture and Rural Development (NABARD) launched the All India Rural Financial Inclusion Survey (NAFIS) for the reference year July 2015–June 2016.
  • Demand-side information on the economic profiles of households is available from the All-India Debt and Investment Survey and Situation Assessment Survey of Agricultural Households but there are no surveys of rural households during the intervening years with an emphasis on financial inclusion and financial accessibility.

NAFIS

  • Financial inclusion has gained considerable importance over the last two decades in India, with the Reserve Bank of India (RBI) and the central government formulating financial assistance schemes to aid vulnerable households.
  • The “Report of the Committee on Financial Inclusion” (with C Rangarajan as its chairperson) describes financial inclusion as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost
  • The target group comprises the weaker strata of rural (agricultural and non-agricultural) and urban households.
  • Financial accessibility is also a component of financial inclusion, and is categorized from the demand side. The supply side includes banking outlets in villages and coverage of locations through business correspondents (BCs), basic savings bank deposit accounts (BSBDAs), overdrafts (ODs), and the Kisan Credit Card (KCC) scheme.
  • However, demand-side investigations from a household perspective are limited to surveys conducted by the National Sample Survey Office (NSSO) of Agricultural Households:
    • All-India Debt and Investment Surveys (AIDIS) – is oriented towards the debt and investment aspects of households (rural and urban)
    • Situation Assessment Surveys (SAS) – focuses on the livelihood aspects of agricultural households.
  • NABARD All India Rural Financial Inclusion Survey (NAFIS): combines the financial aspects of AIDIS and the livelihood aspects of SAS.
  • The NAFIS covers Tier 3 to Tier 6 centres (that is, rural and semi-urban centres with a population of 50,000). The frame for the survey is, thus, truncated, covering a small segment of semi-urban centres.

Notes on the Survey Results

  • For agricultural households, the percent share of income from cultivation (35%) was slightly higher than that of wage labour (34%). This means that cultivation is not the most prominent source of income. Thus, the results indicate that marginal farmers, in particular, are drifting away from cultivation, and eke out their livelihood by other means.
  • The distribution of income and consumption by size of owned land indicated that there is surplus income exceeding their consumption, only in the case where those who possess more than one hectare of land. Otherwise the consumption exceeds income therefore analysis of borrowings by purpose revealed that loans are used for consumption expenditures also
  • The survey report indicated that about 89% of households have a bank account, possibly a basic savings bank deposit account. The growth in bank accounts is mainly attributable to the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme. It is necessary to enquire whether the accounts are operational, or currently lie dormant without any transactions.

Financial Inclusion

  • Ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost is called Financial inclusion
  • These include not only banking products but also other financial services such as insurance and equity products.
  • The essence of financial inclusion is to ensure delivery of financial services which include – bank accounts for savings and transactional purposes, low cost credit for productive, personal and other purposes, financial advisory services, insurance facilities (life and non-life) etc.
  • Financial inclusion broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays its own role in the process of economic development.
  • Financial inclusion also mitigates the exploitation of vulnerable sections by the usurious money lenders by facilitating easy access to formal credit.

Report of the Rangarajan Committee

  • As per the NSSO data, (51.4%), out of a total no of farmers in the country do not accesses credit, either from institutional or non-institutional sources.
  • Only 27% of total farm households are indebted to formal sources
  • Farm households not accessing credit from formal sources as a proportion to total farm households is especially high. The poorer the group, the greater is the exclusion.
  • The Rangarajan Committee recommended that extending outreach on a scale envisaged under National Rural Financial Inclusion Plan (NRFIP) would be possible only by leveraging technology to open

PM Jan Dhan Yojana (PMJDY)

The mission mode objective of the PMJDY consists of 6 pillars.

  1. Universal access to banking facilities
  2. Financial Literacy Programme and
  3. Providing Basic Banking Accounts with overdraft facility of Rs.5000 after six months and RuPay Debit card with inbuilt accident insurance cover of Rs 1 lakh and RuPay Kisan card, will be implemented.
  4. Creation of Credit Guarantee Fund   for coverage of defaults in overdraft  A/Cs
  5. Micro Insurance and
  6. Unorganized sector Pension schemes like Swalamban.

The Way Ahead

  • The NAFIS may be considered a pilot survey, and improvements may be effected in subsequent surveys, which are planned for every three years.
  • The results can also be used as inputs in the national accounts by Central Statistics Office (CSO) and also by RBI in formulating strategies to have higher financial inclusion
  • Even if the scope of the survey is confined to the present frame, it will be necessary to have separate estimates for agricultural and non-agricultural workers, and for the rural sector as a whole.
  • Finally, it would be necessary for another organisation to conduct a similar repeat survey for the urban sector, as financial inclusion covers both sectors.

For more EPW articles, read “Gist of EPW”.

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